3. TRADE

Throughout the last decade there has been a continuous process of gradual transfer of decision-making on market access, from national to supranational, and even global, level. The main international agreement regulating the flow of goods across borders is the General Agreement on Tariffs and Trade (GATT) of the World Trade Organization (WTO). At regional level, many free-trade agreements have been implemented (EU, NAFTA, ASEAN, CARICOM, etc.).

For the North African region, and more widely for the overall Arab area, currently twin tendencies can be observed, a sort of dual-track process. On the one hand, there is an ongoing intra-Maghrebine and intra-Arabic integration process. Its main aim is the achievement of the GAFTA, pursued, as a first step, through bilateral agreements among the members. On the other hand, there are individual agreements between Maghreb countries and the EU. The first process, i.e. interregional integration through GAFTA, is considered by many to be sine qua non for improving the partnership of Arab countries with the EU and for the implementation of a free-trade area in the Euro-Mediterranean region.

In terms of fish trade, both markets are the object of this paper, and have great potential for expansion.

Nevertheless, even if intra-regional fish trade among North African Mediterranean countries is currently negligible due to numerous hindrances, the fish market of this region has great potential for growth. There are several factors that could promote expansion in the seafood market: the positive growth rate in the demographic trend of the overall Arab population; higher per capita earnings and standards of living, leading to increased demand for fish products; and the role that tourism plays in some countries, particularly Egypt, Morocco and Tunisia. Furthermore, the countries considered in this paper can be considered, to some extent, not competitive countries in terms of production and consumer preferences. Given this, they could gain a lot of benefit from internal trade in fish commodities, more so than with non-Arabic countries, and intra-regional exchange should be pursued as a market strategy.

In contrast, fish trade among the North African countries and their European partners across the Mediterranean seems to be in continuous expansion.

First of all, Algeria, Egypt, the Libyan Arab Jamahiriya, Morocco and Tunisia exploit the differences existing between their industry and the fishery production of some European countries. In fact, as will be seen in the next sections, a large part of North African Mediterranean imports from EU consists of fish products in the processing of which some Northern European countries are specialized (i.e. frozen seafood, fishmeal).

Second, EU consumption of fishery products has increased in recent years. In 1996, it is estimated that total consumption of fishery products (excluding canned fish) in Europe amounted to 4 125 000 t (ProFound, 1998).

Given that European fishery production is largely limited by quotas and restrictions, it is expected that Europe will become more dependent on imports, following restrictions on landings and rising consumption levels. More than 180 countries worldwide supply the immense flow of fishery products into European countries. Many of these suppliers are developing countries. The fishery products from developing countries, in general, do not directly compete with European supplies, but serve as a supplement to the local assortment. The supply from developing countries consists mostly of warm-water species from tropical areas. In terms of volume, Argentina is the major developing country supplier to the EU, while in terms of value, Thailand is the most important country of origin of all developing countries (ProFound, 1998). Among African countries, Morocco, which takes advantage of its strategic position near the EU, is the major supplier.

However, developing countries have to comply with a complex and sophisticated regulatory framework governing quality and safety of fish products. In fact, the quality of a fish product is the key to successful penetration of the EU market. Following the harmonization of rules and regulations in the EU since January 1993, uniform quality regulations apply EU-wide. Directive 91/493/EEC and Directive 91/492/EEC have special relevance to trade in fishery products. The key feature of both Directives is that all fishery products (whether fresh, chilled, frozen, canned, salted, smoked or dried) imported from third countries into the EU must come from a preparation, processing, packaging or storage facility that is approved by the competent body in the country concerned, to be able to guarantee an acceptable quality of fishery product for consumers in the EU. Following the implementation of the Directives, the European Commission is in the process of laying down specific harmonized import conditions for third countries exporting fishery products to the EU. Directive 95/328/EC stipulates that a health certificate has to accompany all imports of fishery products from third countries, except for countries for which an individual decision has been adopted by the EU. A more specific - and obligatory - standard that applies to the food-processing industry is the Hazard Analysis Critical Control Point (HACCP) standard. The EU Directive 93/43/EC, which became effective on 1 January 1996, stipulates that: “foodstuff companies shall identify each aspect of their activities that has a bearing on the safety of foodstuffs and ensure that suitable safety procedures are established, applied, maintained and revised on the basis of the HACCP system.” The HACCP system is applicable to companies that process, treat, pack, transport, distribute or trade foodstuffs, and is therefore also of relevance to fish exporters in developing countries, because responsibility for conformity to the system is passed all along the production chain.

However, in some cases, the EU Directives on the quality of fish products entering the EU market are seen as new barriers to trade by developing counties seafood exports if they do not comply with them.

“So, it is of great importance for the Arab countries to establish improved means to upgrade national fish inspection and quality control structures at all levels (fishing vessels, landing sites, processing plants, markets, government inspection structures, quality control at plant and laboratory levels)”. (FAO/RNE, 2001)

Strengthened collaboration with EU and other European countries under proper terms may be one of the ways to overcome problems with health regulations and quality control requirements.

3.1 Intra-regional agreements and fish trade

Countries analysed in this paper are participants in trade agreements involving, in most cases, the majority Arabic countries, with the exception of the Union du Maghreb Arab (UMA) [sometimes termed the Arab Maghreb Union (AMU)], which is an agreement involving only the Maghreb region. These pan-Arab connections reflect the strong link that derives from their common cultural and religious background. For this reason, Arabic trade agreements are, to some extent, political agreements rather than economic and commercial. In fact, as it will be shown, an economic free-trade area in the Arab region is far from fact.

As for intra-regional fish trade, it is negligible, due not only to commercial factors but also to administrative barriers to trade, primarily the lack of transport facilities. Another factor noted when trying to explain the exiguity of fish trade - and indeed overall trade - among the five countries analysed here is the question of whether or not the Arab economies are similar or complementary. This is a source of much debate. As for overall trade,

“the disparity that these countries present in the distribution of natural resources, population, wealth and environment is used to maintain that they are complementary.” (ISS, 2000).

But, it is also said that

“their intra-trading is still very small. This is also explained by the fact that this region’s economies are small by global standards, are specialized along similar industrial lines, and are closely linked to the large, complementary economies of Europe. As a result there is not much to gain from extending preferences to neighbours at the expense of more efficient extra-regional producers.” (ISS, 2000)

As for the fish sector, both positions can be asserted. In fact, on the one hand, Arab countries can be considered not competitive countries, in relation to production and consumer preferences. Given this, they could gain a lot from internal exchange of fish commodities more than with non-Arabic countries, and intra-regional exchange should be pursued as a market strategy. On the other hand, they can be considered competitive, as far the processing sector is concerned. They in fact have, especially the Libyan Arab Jamahiriya, Morocco and Tunisia, a specialization in the fish canning sector, mainly of small pelagic species (i.e. sardines and anchovies). The only sector with no competition is fish meal production, with Morocco as the almost sole producer.

Before a brief analysis of the fish trade relations among North African Mediterranean countries, an overview is given of intra-regional agreements and general trade.

3.1.1 Historical overview of intra-regional agreements

The idea of regional integration among the Arab Countries is not a new idea.

• Cooperation agreements among Arab States began in 1953, when the first agreement on trade facilitation was approved by the Economic and Social Council of the Arab League (Agreement on Trade Facilitation and Organizing Transit Trade).

• In June 1957, the project for the constitution of an Economic Union among the Arab States was approved. This project foresaw free circulation of persons and capital and, first of all, the setting up of a common customs area.

• In August 1964, the fundamental decision for the creation of an Arab Common Market was signed. It is a middle course between the Agreement on Trade Facilitation and Organizing Transit Trade signed in 1953 and the Convention for the creation of the Economic Union among the Arab States, approved by the Arab League in 1957.

• In 1981, the Agreement for the Facilitation and Promotion of Trade among Arab States was signed in Tunis.

• Finally, in June 1996, the programme for the creation of the Greater Arab Free-Trade Area (GAFTA) was adopted by the Arab Summit, convened in Cairo. To set up this free-trade area, 18 Arab states approved a working programme that came into force on 1 January 1998.

On a sub-regional level, the principal and best-known trade agreements are the following:

• The Union du Maghreb Arab (UMA) [less often termed the Arab Maghreb Union (AMU)]. It was proclaimed by the five Maghreb Countries (Algeria, the Libyan Arab Jamahiriya, Mauritania, Morocco and Tunisia) meeting in Marrakech in February 1989, based on an agreement providing the progressive achievement of free circulation of persons, goods, services and capital among the Member States.

• The Cooperation Council of the Arab States of the Gulf (Gulf Cooperation Council - GCC) was established in 1981. The Member States are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. GCC issued an Economic Unified Convention aiming for the achievement of free circulation of persons and capital.

3.1.2 The Greater Arab Free-Trade Area (GAFTA)

In February 1997, the Arab League launched a free-trade programme, known as the Greater Arab Free Trade Area (GAFTA) [known in French as Grande Zone Arabe de Libre Echange (GZALE)], in which member states were asked to produce specific commitments regarding elimination of tariffs, non-tariff measures, and rules of origin.

Countries involved in the creation of GAFTA are Arab League members. At present, 14 of them are effective members of the free-trade area, complying with total or partial procedures of adhesion. These are Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, the Libyan Arab Jamahiriya, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia and the United Arab Emirates. Five countries are in progress of adhesion (Mauritania, Palestine, Somalia, Sudan and Yemen), and three countries, namely Algeria, Comoros and Djibouti, have not yet adhered. All these countries, apart from the Libyan Arab Jamahiriya and Mauritania, compose the so-called Middle East and North Africa (MENA) region, whose promotion has coincided with the launching of the Barcelona Initiative by the EU (ISS, 2000).

GAFTA entered into force on 1 January 1998. In 1997, in Cairo, the Economic and Social Council of the Arab League adopted two legal documents, namely the GAFTA Declaration, and the Executive Programme of the Agreement for the Facilitation and Promotion of Trade for the implementation of GAFTA.

The Declaration defines some objectives, of which the most important are: the setting up of GAFTA over a ten-year period, starting from January 1998; promoting economic and trade relationships among the Arab countries; and developing economic and trade relationships with third countries with respect to the new rules set up by the Common Market Organization.

The Executive Programme is an effort to revive the 1981 Agreement for Facilitation and Promotion of Trade among the members. The programme calls for tariff reductions over a ten-year period at a rate of 10% annually, meaning that tariffs would be reduced to zero by 2007. In addition, the members agreed to bind their national tariff schedules as of 31 December 1997. By September 1999, 14 countries had applied tariff reduction schemes and fulfilled the tariff commitments. For the other members who did not ratify the agreement, the bound tariffs will be applied at the time they notify the Arab League of their endorsement of the programme. Regarding liberalization of industrial products, members are allowed to draw up a list of exceptions from tariff reductions during the first years of the programme. The exceptions are intended to enable local industry to restructure and improve its competitiveness before having to face open competition from other GAFTA countries’ imports. In the area of agriculture, the programme offers members the opportunity to suspend tariff reductions on some produce during the peak harvest seasons. Each GAFTA country is allowed to submit ten produce items for suspension, with a total exemption for all the items of 45 months. So far, 10 GAFTA countries have submitted a list of 30 fruits and vegetables.

Concerning non-tariff barriers, the programme calls for a schedule to reduce non-tariff barriers, but, at the time of writing, the GAFTA countries had not tackled these barriers. A committee on non-tariff barriers had agreed on a list of goods whose imports were prohibited for religious, health, environmental or national security reasons, and the list was to be reviewed annually. The committee was also supposed to sort out other goods submitted by members and start negotiations for their elimination.

The programme calls for the application of international rules regarding subsidies, countervailing measures, safeguards, and anti-dumping measures. This should be possible under WTO agreements. However the programme does not explicitly refer to the WTO agreements since only nine effective GAFTA countries (Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Qatar, Tunisia and the United Arab Emirates), one in progress of adhesion (Mauritania) and one seeking GAFTA membership (Djibouti) are WTO members. Some of them are WTO observers (Algeria, Lebanon, Saudi Arabia, Sudan and Yemen).

Regarding rules of origin, the GAFTA value-added requirement is set at 40%, and there are two methods for calculating origin. The first is based on the local-value-added approach. The other is the net-cost approach, which determine the base for calculating the ratio of foreign to domestic content, subtracting specified imported expenses from the transaction price. An important feature of the programme is the ongoing scheme for the elaboration of detailed preferential rules of origin for GAFTA-made products. The scheme adopted rules for full cumulation of origin among the GAFTA countries. This means that materials obtained from, for example, Tunisia, and incorporated into a product made in Morocco, may be considered as if they were obtained in Morocco.

The dismantling of across-the-board tariffs is essential to the development of free trade among Arab countries. However, many obstacles currently hinder its achievement.

• First, the achievement of GAFTA objectives depends a lot on the effective rate of protection across industries in the Arab countries. Currently, tariff structures are uneven: low-tariff countries, namely the Gulf countries, have simple average tariffs of 4-12%, while countries such Egypt, Jordan, Morocco, Syria and Tunisia, have tariffs of 40-100%. Tariffs reach 235% in Syria. In addition, tariff escalation exists in many countries, particularly in textiles, clothing, leather and basic metal industries, where average tariffs on finished products are multiples of the lower tariff levels on raw materials.

• Second, the exclusion of certain agricultural products during the crop or harvest seasons for the full transitory period of ten years would also substantially limit trade creation effects.

• Third, a lot of non-tariff barriers exist. Some of them take the form of import licensing for safety and health standards, as in Egypt, Jordan, Morocco and Tunisia. Customs and administrative procedures associated with importing are still important trade barriers within the region. The programme calls for some harmonization related to customs clearance procedures, but it does not address harmonization of other major regulations regarding product standards, testing and certification procedures, and environmental standards. Furthermore, means of transport are one of the most important barrier to the growth of intra-regional free trade. GAFTA members signed an earlier agreement to simplify the transit of goods and persons, but there has been no legal enforcement for the implementation of this agreement, and there are periodic reports citing barriers to cross-border trade, such as closure of roads, delays and cumbersome cross-border regulations, such as no driving on week-ends or the refusal of visas to professional drivers of certain nationalities. Given that trade in services is generally complementary to trade, transport services liberalization should be a first step towards the free-trade area creation. Maritime transport remains by far the principal means of intra-regional transport of goods: therefore, a regional agreement on common shipping policy principles is needed. Land transportation services are an important cross-border mode of passenger and freight transport in the GAFTA countries. However, the regulatory regime for road transport is highly restrictive in the GAFTA countries. For instance, cross-border freight transport returning with cargo is not allowed by most of the GAFTA countries. As for the internal coasting trade, it is also not allowed in most of the GAFTA countries.

Apart from these barriers to trade, a lot of structural constraints, hindering the further development of GAFTA exist. In summary, they include:

• Political and religious factors Despite their common linguistic and religious background, Arab countries are not united among themselves. In some cases, political and economic differences exacerbate regional contrasts. Among the members, there is no one economic and ideological model that can constitute the lowest common denominator, as might happen for other regional agreements.

• Economic and structural constraints The economies of the Arab region are characterized by economic and structural differences directly related to the small size of markets, and in some cases to financial dependence or external indebtedness. The question is, in an economic context dominated mainly by the primary sector (hydrocarbon production and agriculture), whether dismantling tariffs is sufficient to instigate the process of regional integration.

• Absence of economic coordination among the members The absence of a coordinated plans of action for national development among Arab countries constitutes a further barrier towards the achievement of GAFTA objectives.

3.1.3 Bilateral agreements between Mediterranean partners

Setting up an Arab free-trade area is a lengthy process, and for its achievement several Arab countries have concluded a new generation of bilateral agreements, following the implementation of the Executive Programme establishing GAFTA.

Currently, three bilateral trade agreements exist between countries covered in this report, namely Egypt, Morocco and Tunisia.

The Egypt-Tunisia free-trade agreement was completed in 1998 and came into effect in 1999. A positive and negative list approach to the phasing out of tariffs and other import charges was pursued, and a three-tier liberalization scheme was adopted. Initially, immediate exemptions from tariffs and other taxes were granted to a list of imported raw materials and industrial products in each of the two countries. The agreement then specifies that the products that are subject to ad valorem tariff duty and other charges in excess of 20% in each country will be phased out progressively and will be totally abolished by the end of 2007. The agreement includes a negative list that excludes from the liberalization scheme products that are deemed sensitive in terms of competing with domestic production. The agreement suspended raw and processed agricultural products and does not extend liberalization to trade in services. As far as preferential rules of origin are concerned, the Egypt-Tunisia free-trade agreement sets the minimum required local content at 40%.

The Egypt-Morocco free-trade agreement was concluded in 1998 and came into effect in 1999. The agreement is similar to that between Egypt and Tunisia, in opting for a positive and negative list approach to trade liberalization and a three-tier scheme to phase out tariff and other import surcharges within 12 years. The agreement also specifies a negative list of products from each country that will remain subject to Most Favoured Nations (MFN) tariff rates until future negotiations are held. The agreement excludes agricultural products from liberalization, as well as trade in services. The minimum required local content is 40%.

A Tunisia-Morocco free-trade agreement was signed in 1999 but it is not yet effective.

Egypt, Morocco and Tunisia are also involved in free-trade agreements with other Mediterranean countries, namely Jordan and Lebanon.

The matrix of multilateral and bilateral free-trade agreements are given in Table 2.

3.1.4 Intra-regional trade

Table 3 shows some data on inter-Arabic overall exchange trade, from 1993 to 1998, in value terms. An increasing trend is evident for both export and import trade among Arabic countries. During the period covered, exports and imports among Arabic Countries increased respectively by 11% and 25%. A similar rate of increase (around 25%) was apparent for total imports of goods with the world as a whole, while total exports fell by 7%. As a result, in 1998, the share of internal exports in the total increased by 2 percentage units (from 10% in 1993 to around 12% in 1998).

To some extent, it can be said that some results in terms of free trade have been achieved.

Table 4 provides an indication of the importance of the inter-Arabic market compared to total exchange trade for GAFTA members considered here. Algeria is not included as it is not yet a GAFTA member. Comparing Tables 3 and 4, it is evident that the importance of the Arab market is less than the average value for the global Arab area, especially for the Libyan Arab Jamahiriya, Morocco and Tunisia. This reflects the strength of their trade with markets external to the Arab area, mainly the EU economies.

Table 2. Matrix of multilateral and bilateral free-trade agreements in the Mediterranean region

NOTES: FTA = free trade agreement. For Egypt, Morocco and Tunisia, the Association Agreements replace the earlier Cooperation Agreements.

[1] Cooperation Agreement 07/1976; Euro-Mediterranean Agreement under negotiation. See Cooperation Agreement between the European Economic Community and the People’s Democratic Republic of Algeria, Official Journal L 263, 27/09/1978.

[2] The Conference of Foreign Ministers of EU held in Stuttgart on April 1999, in which the Libyan Arab Jamahiriya participated as guest of the Presidency, agreed that the country would become a full member of the Barcelona Process as soon as the UN Security Council sanctions had been lifted. Meanwhile, the Libyan Arab Jamahiriya accepted the whole Barcelona acquis.

[3] Cooperation Agreement 09/1978; Association Agreement Signed 06/2001. See Cooperation Agreement between the European Economic Community and the Arab Republic of Egypt, Official Journal L 266, 27/09/1978.

[4] Association Agreement signed 02/1996; Effective 03/2000. See Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the Kingdom of Morocco, of the other part, Official Journal L 70, 18/03/2000.

[5] Association Agreement signed 07/1995; Effective 03/1998. See Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Tunisia, of the other part, Official Journal L 97, 30/03/1998. SOURCE: Handoussa and Reiffers, 2001.

Table 3. Inter-Arabic trade and total exchange trade, 1993-1998

SOURCE: Data from GAFTA Secretariat, Arab League, 1999

Table 4. Inter-Arabic trade relative to total exchange trade for some GAFTA countries

SOURCE: Data from GAFTA Secretariat, Arab League, 1999

3.1.5 Intra-regional fish trade

Fish trade among Arab states is negligible and, as for overall trade, this is mainly due to commercial and administrative constraints. However, it must be said that the Arab regional fish market, and with it the market of all the North African Mediterranean countries, has significant potential, with many factors pushing it towards enlargement. First of all, the seafood market seems to be in expansion. The overall Arab population, estimated at 270 million, has had an annual growth rate of 2.2%, and this, coupled with higher per capita earnings and standards of living, has led to increased demand for fish products. To this must be added “increasing health consciousness, more working women, consolidation of food distribution, one-stop shopping, introducing of fishery products in the food programme in schools, hospitals, army and similar areas” (FAO/RNE, 2001). Tourism also plays an important role in stimulating the development of the fish market in this area. As seen in Chapter 2, the high level of seafood consumption in some countries (Egypt, Morocco and Tunisia) is directly linked to tourist flows. Furthermore, taking into account “differentiation in species, seasonality and consumers preferences” (FAO/RNE, 2001), Arab countries cannot be considered competitive countries at all and fish trade could be pursued as a market strategy.

Anyway, barriers to trade hindering the development of the overall exchange trade within the Arab region, cited in the previous section, constitute a constraint also for the development of fish trade among North African countries, the topic of this paper. They can be summarized succintly as lack of regular shipping and air freight facilities, insufficient transportation from coastal to inland areas and an absence of unified criteria and standards for quality control for fish and fishery products.

Regrettably, there are few available data on fish trade among Arab countries and, as a consequence, among Arab countries around the Mediterranean. The only available data dealing with trade in fishery products among Arabic economies are for Morocco. It is not a coincidence that these data relate to Morocco, which is the fish export leader in the Arab area.

Tables 5 and 6, showing export destinations of fishery products originating in Morocco in 1997 and 1998, clearly show that Moroccan fishery production going towards the UMA area is negligible when compared to the total (less than 1%). In terms of quantity it was equal, in 1998, to 0.14% of total exports, a slight increase over the previous year (0.06% of the total). Products destined for the UMA fish market are canned fish, and fresh, salted, dried, smoked or frozen fish. For canned fish, figures show an increase in UMA-oriented exports, increasing from 0.21% in 1997, to 0.34% in 1998, while the fresh, salted, dried, smoked or frozen fish category went from zero in 1997 to 0.27% in 1998. In terms of value, the share of fish exports towards UMA countries was lower in 1998 compared to 1997. This is explained by the presence, in 1997, of products such as corals and fish meal. However, while coral is generally recognized as a high value product, fish meal is not. In this case, the high value is due to the role of Morocco as producer of fish meal in the UMA area. In fact, of the five countries analysed in this paper, Morocco has been, in the last decade, the only producer and exporter of fish meal in the region.

As noted in the description of the Moroccan fishery sector (Appendix 5), the great bulk of the Moroccan internal supply is destined for the poultry sector for feed purposes.

Table 5. Destinations of fish product exports from Morocco, 1997 and 1998 (on a percentage basis by quantity)

SOURCE: Website of Ministère des Pêches Maritimes, Royaume du Maroc (www.mp3m.gov.ma)

Table 6. Destinations of fish product exports from Morocco, 1997 and 1998 (on a percentage basis by value)

SOURCE: Website of Ministère des Pêches Maritimes, Royaume du Maroc (www.mp3m.gov.ma)

3.2 Agreements and fish trade with European Union

3.2.1 The Euro-Mediterranean Partnership

The establishment of WTO has been the final step in a long series of discussions and negotiations that have had, as an indirect effect, the rebirth of interest in regional cooperation and agreements. As a result, various types of agreement have been established, such as NAFTA, MERCOSUR, EFTA, CARICOM, ASEAN, etc., and other free-trade agreements are being discussed. One of them is the Euro-Mediterranean Partnership, that represents the conclusion of 20 years of continuous negotiations between the European Union and its Mediterranean partners. The EU’s interest in the Mediterranean region is not new: it began in the mid-1970s with a series of Cooperation Agreements between the EC and Mediterranean countries (see Table 2). In fact, it is emphasized that “it is in the Mediterranean that Europe finds its root” (Sadek, 2000). This process culminated with the Barcelona Declaration (Barcelona, 27-28 November 1995). The declaration spells out the Mediterranean Basin Initiative that seeks to strengthen political ties and gradually create a Europe-Mediterranean free economic area. The envisaged EU-MED free-trade area implies reciprocal free trade in manufactured goods; preferential and reciprocal access for agricultural goods of interest to both partners; and free trade among the Mediterranean partners themselves, with “Mediterranean Partners” considered to be all Mediterranean countries not belonging to the EU. The process starts with free-trade agreements between the EU as a whole and each of the Mediterranean partners individually, along with similar free-trade agreements among the Mediterranean partners themselves (see Table 2). The process should culminate with an overall agreement between the EU and these countries as a region. Countries participating at the EU-MED initiative are the 15 members of the EU and 12 Mediterranean partners, namely Algeria, Morocco and Tunisia in the Maghreb, and Egypt, Israel, Jordan, Lebanon, the Palestinian Authority and Syria in the Mashrek; and Cyprus, Malta and Turkey. As far as the Libyan Arab Jamahiriya is concerned, since its participation in 1999 in the Stuttgart Conference as a special guest of the EU Presidency, the Libyan Arab Jamahiriya takes part as an observer in some of the meeting of the Barcelona Process (see Box 1). As noted in the Overview on the EU website

“On the basis of a consensus among the 27 partners on its admission reached on the occasion of the “Barcelona III” Stuttgart conference of Foreign Ministers on 15-16 April 1999, The Libyan Arab Jamahiriya could in time become a further partner in the Barcelona Process following the lifting of UN Security Council sanctions against it and once it accepts the full terms of the Barcelona Declaration and the related actions”.

The main objectives of the Barcelona Declaration are:

(i) the establishment of a common Euro-Mediterranean area of peace and stability based on respect for human rights and democracy;

(ii) the progressive establishment of a free-trade area between the EU and its Partners, and among the Mediterranean Partners themselves, accompanied by EU financial support for economic transition in the Partners; and

(iii) the development of human resources, promotion of cultural integration and rapprochement of the peoples in the Euro-Mediterranean area.

As a concrete step to implement the Barcelona Declaration’s objective of creating an area of shared prosperity, the Declaration has the objective to form, by 2010, a Euro-Mediterranean Free-Trade Area. This free-trade area is supposed to link together the 15 EU Member States and the 12 Mediterranean Partners. Together with EFTA and Central and Eastern European candidate countries for EU enlargement, at a later stage, this zone could include some 40 States and 600-800 million consumers, becoming one of the world’s most important trade entities. To some extent, the EU enlargement to the east could constitute a competitive factor in the context of already weak comparative advantages of Arab countries vis-à-vis the EU. In fact, many Arab and Eastern European countries have the same industrial specialization, a result of common political plans followed, to some extent, in the last decades.

As well as bilateral, “vertical,” trade liberalization with the EU, the EURO-MED initiative foresees “horizontal” - often termed South-South - integration, to be implemented by the Mediterranean partners among themselves. This was dicussed earlier in the section on GAFTA. The dismantling of custom duties requires many reforms in the fiscal, industrial and general sectors of all the Mediterranean partners. To assist in this, the MEDA Programme provides support for economic reforms in the public and private sectors of the Mediterranean countries. The MEDA programme is the principal financial instrument of the EU for the implementation of the Euro-Mediterranean Partnership, and offers technical and financial support measures to accompany the reform of economic and social structures in the Mediterranean partners. See also www.europa.eu.int/comm/external_relations/med_mideast/euro_med_partnership/meda.htm.

Regarding the countries that are the focus of this paper, the earlier generation of Cooperation Agreements between the EU and its Mediterranean Partners has been partially replaced by a new generation of agreements (see Table 2).

3.2.2 The tariff scheme

Algeria, Egypt, the Libyan Arab Jamahiriya, Morocco and Tunisia belong to the list of “developing countries,” and also adhere to the Global System of Trade Preferences (GSTP) (see Box 2). In the last decade, various instruments have been implemented to foster development and exchange trade between developed and developing countries. Trade has always been considered one of the most effective tools for stimulating development in the less-rich countries. Increasing trade has direct effects on export earnings and also on industrialization. To this end, in 1971, the European Community adopted the first Generalized Scheme of Preferences (GSP). The GSP, born as a result of some years of discussion inside the United Nations Conference on Trade and Development (UNCTAD), is an instrument that allows industrialized countries to grant autonomous and non-reciprocal trade preferences to all developing countries. To implement this system, an authorization (the enabling clause) was required under General Agreement on Trade and Tariffs (GATT) rules, allowing for an exception to the principle of MFN treatment and establishing that a member cannot discriminate between imports from different sources - all are equally “most favoured” (this principle is established by Article 1 of GATT). The EU’s GSP is implemented on the basis of a ten-year cycle. Under the general arrangements of the GSP, the preference for a given product - as a percentage by which MFN duty rates are reduced - is basically the same for all countries. This percentage depends on a given product’s “sensitivity,” which is determined by the situation of the sector manufacturing the same product in the Community. According to its degree of sensitivity, each product is classified as belonging to a specific group. Each group enjoys a different preferential margin: the greater the sensitivity, the smaller the preferential margin. This is termed “modulation.”

There are, however, provisions, to reduce or extend preferential treatment for individual countries or specific sectors in such countries. Indeed, some countries are granted duty-free access to the EU market for virtually all their products. This applies to least-developed countries (LDCs), as well as several countries suffering negative effects from illegal drug production.

The present cycle begun in 1995 and will expire in 2004. Regulations are valid for a period of 3 to 4 years. The actual regulations cover all products and all arrangements and it is laid down in Council regulation (EC) No.2820/98 of 21.12.1998. On 12 June 2001, the EU Commission approved the new GSP scheme for the period 2002-2004. This new GSP scheme is designed to simplify the GSP regime in order to be more effective in the interest of developing countries. The new Regulation complements and fully incorporates the recent Everything But Arms initiative, adopted by the Commission in September 2000. The plan favours the 48 poorest countries (LDCs) (see www.europa.eu.int/comm/trade/miti/devel/eba2.htm). A complete list of those countries considered LDCs is given at www.wto.org/english/thewto_e/whatis_e/tif_e/org7_e.htm. Preferences under the GSP are granted for exports of specific products from individual countries. For trade in fishery products between EU and third countries, a synthesis of the tariff scheme is shown in Appendix 3. The Appendix gives rates of duty applicable to the various fishery products (codes 03, 1604, 1605, 1902 2010, 2301 20 00 (from Combined Nomenclature (CN) code, 2001) and for the most important groups of Third Countries. Imports from Algeria, Egypt, the Libyan Arab Jamahiriya, Morocco and Tunisia are subject to the GSP tariff rates, including the autonomous tariff suspension and the autonomous tariff quotas applied erga omnes (based on EC Regulation No. 2803/2000 of 14.12.00, opening and providing for the administration of autonomous Community tariff quotas for certain fishery products).

This tariff scheme is fully applied to imports of fish products from the Libyan Arab Jamahiriya and Egypt. For Algeria, the scheme is fully applied to fishery products originating in Algeria and entering the EU area, with the exception set by §18 of the EU agreement with this country for products falling within subheadings 16 04 of the Common Custom Tariff (prepared and preserved sardines).

Finally, the GSP scheme is almost totally replaced by the special provisions regulating imports of fishery products originating in Morocco and Tunisia. These provisions are contained, respectively, in Protocol 2 of the EU Agreement with Morocco and in Protocol 2 of the EU Agreement with Tunisia (Appendix 4). These protocols grant an access free of custom duties to almost all fishery products originating in Morocco and Tunisia, with some exceptions for prepared and preserved sardines.